With South Korea blocking a trilateral FTA with China, bilateral accord with Beijing mulled

The government is debating whether to start talks on a free-trade deal with Beijing as prospects for reaching a trilateral accord with China and South Korea appear to be fading, trade sources said Wednesday.

The three countries have already held preparatory talks aimed at beginning formal negotiations on a trilateral FTA at a key summit next month, but with the chances of a deal receding, the government may instead turn its focus to a bilateral accord with China, the sources said.

Japan would start the necessary preparations to begin trade talks with China once South Korea formally confirms its opposition to joining a trilateral accord at the summit to be held May 13 and 14 in Beijing, they said.

China has already sounded out Japan about starting discussions on a bilateral trade deal.

The government was initially cautious due to concerns that domestic agriculture could be ruined by cheaper imports but now believes a bilateral FTA would boost exports of industrial products. It also views a deal as necessary to vie with South Korea, which is also seeking to begin free-trade talks with China.

“We cannot postpone (trade) liberalization with China any longer,” a government official said.

From the government’s standpoint, the focus of any trade talks with China will be on the heavily protected agricultural market, as framers fear an influx of cheap produce such as rice and chicken.

Japan, China and South Korea launched a joint study on a trilateral FTA in May 2010 and compiled a report last month calling for formal negotiations to begin at an early date.

Tokyo and Beijing had hoped the three sides could reach an agreement in time to start the negotiations at the upcoming summit in China, but Seoul’s resistance has apparently scotched that plan, according to the sources.

South Korea has been reluctant to set a start date for the discussions, fearing that increased imports of Japanese industrial parts, products and materials would undermine domestic companies, they said.

Even if the three countries continue to discuss a trilateral pact until South Korea’s presidential election in December, it remains unlikely they could reach an agreement to start talks, they added.

Japan is also seeking to join multilateral talks on the Trans-Pacific Partnership Agreement and hopes to reach an agreement with the European Union to begin trade negotiations in the near future.